Law School Costs, Student Loan Debt, and Advice for Applicants

Commentary

Don LeDuc, President and Dean | August 27, 2012

Of late, there has been a considerable amount of discussion about the cost of law school and the high levels of debt accumulated by law school graduates. Because much of it is a product of bias and filled with hyperbole, a reasonable discussion requires getting some of the facts and issues correctly stated.

Law School Debt

The median debt of 2010 public law school graduates was about $75,000, the latest available figure. This combines the debts incurred by both resident and nonresident students. For their three years of attendance as resident students, full-tuition, public school graduates would have paid about $55,546, while their nonresident counterparts would have paid about $91,609. Put into annual figures, the loan amount was $25,000, while the respective tuition costs were $18,515 and $30,536. The highest public school average loan debt for any school was about $117,000.

The median debt for private law school graduates was about $115,000, and their total tuition cost was about $107,448. Put into annual figures, the loan amount was $38,333, and the tuition cost was $35,829. Only four of the 120 private schools reported average loans of over $150,000.

Currently, there are a number of loan repayment alternatives, including the standard repayment of 10 years, the graduated repayment of 10 years at a lower rate and 20 years at a higher rate, and the consolidated repayment with a 30-year fixed rate. A fourth alternative with income-based repayment has just been implemented. All these alternatives permit early principal repayment without penalty, and at least one features a form of loan forgiveness.

Using current loan rates for Direct Stafford loans (6.8%) and an estimate of 7.9% for Grad Plus loans, the approximate monthly repayment rates for the current median public and private school loans are listed below:

Public (Median $75,000)

Private (Median $115,000)

Standard

$863/month

$1,323

Graduated

$431/month then $620/month

$662/month then $950/month

Consolidated

$489/month

$750 month

Income-Based

Contingent

Contingent

While these figures are substantial, they show that those who borrow at the median levels are not undertaking unmanageable debt loads. The relatively low default rates reported for the independent private law schools confirm that students are overwhelmingly showing that they can handle the debt burden. No law school comes remotely close to the 25% default rate that is the threshold set by the Department of Education to indicate a problem. For 22 independent law schools, the median default rate was about 1.6%. All but one of these schools is private, so the likely loan amount would be around the private law school median. [Information about university-related law student default rates generally is not available on the Department of Education website.]

These figures cover only law school loans and include students who borrowed nothing, so the averages understate the debt incurred by students who actually borrowed, and they do not include loans incurred during undergraduate education.

Today’s students accumulate significant debt, not just for law school but for other graduate programs, as well as for undergraduate education. So, applicants should consider the long-term implications of debt when deciding on whether to seek further graduate education, including law school. And they should make the cost of law school and the possible accumulation of debt a significant factor in their school-selection process.

Tuition, Fees, and Scholarships

In general, tuition and fees at public schools are significantly lower than at private schools, and the effect of that cost on loan totals is apparent. But tuition costs are reduced significantly by scholarships and grants at both public and private schools, reducing the amount of loans necessary to meet the cost of education.

At public schools, the average scholarship amount per recipient was about $9,800, while at private schools the average was $19,700. This would reduce the cost of tuition for public school recipients by slightly less than $30,000 over three years, while private school recipients would see a reduction of just over $59,000. For many scholarship recipients, tuition costs can be reduced by half or more. And a scholarship may make a private school net tuition cost equal to or lower than that at a public school.

Potential law students are not sufficiently cost conscious in selecting a law school, tending to place too much emphasis on perceived prestige and not enough on net costs of attendance. For some law school graduates, prestige does matter, whether that should be the case or not. Accordingly, that factor should not be disregarded, but it should be considered only after a full consideration of cost, which should be the first consideration.

Here is my advice for the typical law school applicant to consider in law school selection:

1. Be realistic about your chances for admission

Start by using the ABA-LSAC Official Guide to ABA-Approved Law Schools to determine your likelihood of admission based upon your LSAT score and undergraduate grade point average. Do not waste time applying to schools that are significantly beyond your profile. While schools may invite applications and state that they consider other factors than these, the reality is that these two far outweigh the other factors. In fact, by applying to schools at which you have no chance of admission, you simply inflate their rankings and waste your time. Schools are rewarded in the rankings for their "exclusivity," largely measured by how many people they do not admit among their applicants. Many highly ranked law schools had declines between 10% and 20% in applications for the fall 2011 class, yet suffered no decline in incoming class size or profile. They can only do this because their applicant pools have considerably more high-profile students than they need to fill their classes and include large numbers of applicants who cannot meet their profile parameters.

2. Comparison shop the cost of tuition and mandatory fees

Do your best to compare the cost of tuition and mandatory fees at each school you are interested in. This is very difficult to do, because the practices among the law schools vary greatly. Once again, the best starting point is the ABA’s Official Guide, in which each school’s full-time and part-time tuition are reported. These published figures, however, are not perfectly comparable, because the ABA no longer establishes a set reporting standard, such as 13, 14, or 15 credit hours. Also, schools may have "unit" or "block" tuition, meaning that all students within a range pay a set amount, which is good for some students, not so good for others. For instance, schools may charge the same total for a student enrolled for as few as 13 credit hours or as many as 16. Indeed, some schools even lower the minimum to 12 credits, which is below the ABA’s definition of full-time enrollment status. Schools may also have different credit hour requirements for graduation, so using 30 hours per year as guidance is not 100% reliable. And mandatory fees vary considerably, particularly at public schools, which often have very large and complicated fees, so make sure you understand how much they might add to the cost of tuition. At this point, however, you should do the best you can to establish an estimated cost of annual tuition and fees of each school you are considering.

Make sure you have a handle on the tuition cost at the time you intend to start law school. The Official Guide is normally at least a full year behind and schools have mixed abilities to get the latest information about tuition, fees, and costs onto their websites. Over the past four years, resident public school tuition has increased 9.5% on average, public nonresident tuition has increased 7% on average, and private school tuition has increased 5% on average. So, if you know a school’s tuition for a particular year, you can reasonably estimate tuition for the coming year and the two following years using these percentages, but remember that these increases are compound and will vary from school to school and year to year. Don’t forget to see if a school guarantees its tuition rate for the duration of a student’s enrollment, but don’t forget that a school with annual increases may still be lower overall for the three years.

3. Determine your eligibility for a scholarship at each school

Some schools are relatively straight-forward in describing the criteria, others not so much. You can get general comparative information from the Official Guide. Be sure to check for eligibility limits for scholarship continuation, such as requiring a minimum law school grade point average or class rank. These may actually mean that a significantly reduced number of students will retain their scholarships after the first year or even after the first semester. Don’t assume that you will be one of those fortunate enough to meet the continuation criteria, since the success rate varies considerably from school to school. If you are offered a scholarship by a school, make sure you understand both the continuation criteria and the success rate at that school.

4. Estimate a net cost of attendance

You should now be able to compute a reasonably close estimate of the net cost of attendance from the direct costs of tuition and mandatory fees, less scholarships for each school under consideration. You should next rank them in order from low to high cost. My advice is to assume that the lowest cost is your best alternative, absent other factors that convince you that a more expensive choice is better for you. If you can’t identify or value why the more expensive school is better for you, it probably isn’t and you are paying too much to attend law school by choosing the higher cost alternative. Yes, I believe that as a general proposition, all ABA-approved law schools provide a viable legal education.

5. Confirm the cost of living in each location you are considering

Before turning your attention to other factors, you should consider the cost of living in the area in which each law school is located. Although the individual law schools usually identify cost of attendance factors, these vary significantly, even among law schools located in the same city, so be careful with this factor. Cost of living information is available from numerous objective sources and should be consulted.

6. Estimate the total cost of attendance and determine how much debt you will need to incur to obtain a degree at each school

Once you have calculated the cost for three years (or longer or shorter depending on your planned duration of enrollment), consider how much you can contribute from personal or family resources toward that cost. Then, determine how much you will need to borrow to attend each school. Various models exist that will allow you to calculate your monthly, annual, and total repayment costs, separated into principal and interest. Do not hesitate to seek assistance in doing these calculations, which will help you understand exactly what your future repayment obligations will be. Also, be aware of the observation that too many law students borrow heavily so that they can live like lawyers while they attend law school, only to find that when they graduate their loan repayment burden requires that they live like law students while they practice law.

7. Now consider whatever other factors that are significant to you in light of the known costs of attendance for each school

You should consider the non-financial factors only after you have the cost of attendance in mind. For many applicants, location is the governing factor, normally because the applicant must attend a school within commuting distance. Applicants often consider reputation or prestige in the selection process. Pitfalls abound related to reputation and prestige, so you should be sure that what you read or hear is based on as much objectivity as possible. A school’s performance on bar examinations and its placement records are relevant, but you should remember that it is the individual graduates who take the tests and seek the jobs, not the schools themselves. You should not assume that you will automatically pass the bar or get a job simply because you attend a particular school. Nor should you assume that you will not pass the bar or find employment because you attend a school with lower bar passage or employment rates.

If you wish to consider the prestige factor or speculate about bar results or job opportunities, do so with at least a good dose of reality. Unlike the fictional Lake Wobegon, the students at American law schools are not all above average. Aside from personal pride, the prestige of a law school matters little to most of the students that graduate from it. For most graduates, the amount of debt each has upon graduation is a reality that lasts for years and matters a great deal.

Summary

My focus here is on the cost of education and its impact on law school debt. If you are concerned about that issue, and you do not have sufficient resources to pay for law school without borrowing, you should seriously consider selecting the lowest cost alternative available.

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